Financing Versus Leasing – The Benefits of Both
So you’re planning on buying a car, but want to know what your options are first. The three big options are either to buy the car outright, lease the car, or finance it. Not many people can afford to buy a car outright from a dealership, so most people need to decide between leasing and financing their vehicles. The only problem is that most people have no idea what the difference between the two is. If you’re looking for a difference, you’re in luck! We’ll reveal the ins and outs of it all!
Leasing is the more stress-free of the two options. First of all, you don’t actually own the vehicle. The vehicle is owned by the dealership, and you’re paying a certain amount per month until your lease runs out. When your lease runs out, you have the ability to lease a different car. This is perfect for people who want a new and improved car every few years. Secondly, you never have to worry about something going wrong with the car. If you get a flat tire, in an accident, or even accidentally break something, you’re covered. When you lease a car you have the option to get coverage for anything and everything. Warranties come standard with a lot of leases. Although this sounds great, there are a few downsides that should be noted. First of all, you can only drive a certain amount of kilometers. When you put the lease agreement together, there will be a certain limit you cannot exceed. You can increase the amount you can drive but that raises your monthly payments. Also, you cannot modify a lease vehicle as it’s not yours. Doing so would void warranties as well as lease agreements.
Financing a vehicle is the preferred option for people who want to actually own the vehicle. Being the owner of a vehicle definitely has its perks. Not only do you not have to worry about car payments once it’s paid off, but you have absolute freedom. You can drive as far as you want, as much as you want, without worrying about the limitations of a lease. You are also free to customize and modify however you want (within reason of course) without voiding some sort of warranty. Owning a car does have its perks, but it’s not without downsides. First of all, owning a car means you’ll have it for a long time. This means no new upgrades every few years. Also, since you have no warranties, if something breaks you’ll be responsible for fixing it. This may mean some hefty repair costs, or a lot of time and effort if you’re mechanically inclined. Another unfortunate downside is that you’ll have to pay the total cost of the vehicle. When you lease the vehicle you’re only committed to a large percentage. This means your monthly rates will probably be higher than a lease. All in all, if you are planning on having your vehicle for a long time, and want to drive a lot, financing is most likely your best bet.
A Cost Comparison – Leasing vs Loaning
When leasing a car, it’s commonly known that you’ll be paying a lot less per month. Let’s say you put down the same down payment, for the same car, at the same overall price, your lease rates would be almost 60% lower than that of a loan. Even when a loan plan has ultra-low rates, the monthly payments would still be up to 50% lower. Do keep in mind however that the medium-term costs with respect to leasing will be equal to that of the loan. This is however only if the customer trades their vehicle in when the loan runs out.
Some analysts say that financing is actually cheaper than leasing, simply due to the fact that you don’t have to make extra payments for warranties. Also, if you repeatedly trade-in your vehicle, you’ll constantly be making payments. With a financed vehicle you stop paying when it’s paid off. For example, someone who gets a lease vehicle every few years for 10 years is going to spend a lot more money than a person who finances a car and drives that same car for 10 years. However, this is only true if that car is not always breaking down and costing the customer a bunch of money.
Although it may be cheaper to keep the same car for a long time, many argue that it’s not worth it. Over time your vehicle becomes old. Things begin to break, and the vehicle’s assets perform less than what would be satisfactory. Your engine may start to have trouble turning over in the winter. Your electrical systems may falter every now and then. Your tires may go bald and need replacing. All of these factors make it hard for people to choose the long term financially friendly plan. Typically when a vehicle is old and difficult to repair, it would be cheaper to replace than repair anyway. If you’re truly committed to long term savings, however, owning the same car for a decade or more is definitely the route you need to take.
A lot of times insurance rates are what points people in a specific direction. Whichever gives the buyer better rates would probably end up being their choice. However, in this case, insurance rates don’t matter. Your rate does not change based on how you are paying for the car. You and your driving habits and history are what make up the rate. Do keep in mind however that your insurance company does need all of your financing or lease details for their records. This still won’t affect your rates, but it would be wise to keep an open line of communication between the two companies.
What makes up the mind of a lot of people is their credit rating. Bad credit or no credit at all tends to make lease rates spike significantly. Financing rates may increase as well, but not nearly as much as lease rates.
The Auto Loan Centre
Contact us today if you need more information on the differences between leasing and financing. Here at the Auto Loan Centre, we are committed to helping you build up your credit rating, get the rates you want, and drive in your dream car. The first step to doing so is to contact us. Once you do, we’ll get started. Call us now! You won’t regret it.